Hold or continue: What you should do with your SIP as markets correct

Mutual fund managers recommend that investors stay on the pitch and continue their innings

As stock markets experience corrections, particularly in small and midcaps, investors are reviewing their investment strategies.

 

Smallcap stocks have been hit the hardest in the correction. Over the past week, the BSE Smallcap Index has dropped by 9 per cent, while the Nifty Midcap Index has declined by 8.69 per cent. Notably, nearly 70 per cent of small and midcap stocks are now trading below their 200-day moving averages, highlighting persistent selling pressure.

 

“It is quite natural to feel uneasy and most investors panic when markets dip, but history tells us that corrections like this are completely normal,” said Chethan Shenoy, director and  head - product and research, Anand Rathi Wealth Limited.

 

“Right now, the Nifty 50 is down 12.9 per cent from its peak of 26,216 on September 26, 2024, to 22,829 on January 27, 2025. Over the past 25 years, the average maximum market decline has been -19.85 per cent, and the median fall is -14.81 per cent. On an average, these declines last 95 days, with a recovery period of 276 days i.e. less than a year. This means what we are seeing now is milder than usual, and historically, markets have bounced back in less than a year,” he said.

 

There are more than 160 million investor folios in equity funds, with nearly 47 per cent concentrated in the three riskiest equity subcategories: Sectoral/ thematic funds (30.3 million), smallcaps (24.6 million), and midcaps (20.5 million).This suggests that many investors in may not have adequate exposure to core equity segments such as largecap, flexicap, value, and large and midcap funds. 

 

Should investors sell, stop, or continue your SIPs?

 

“India’s economic fundamentals remain strong: GDP growth is forecasted at 6.7 per cent, inflation has stabilised at 4.2 per cent as of January 25, and interest rates are expected to decline, which will support higher equity valuations. Nifty 50 earnings are up 10 per cent quarter on quarter [by this February 25], and mid and smallcap earnings are projected to grow 22 per cent for this FY 25. So instead of reacting to short-term dips, stay invested, keep your SIPs going, and if you have extra funds, consider investing more during this correction and make the best of this market dip,” Shenoy said.

 

“Stopping your SIP during a market downturn is like walking off the pitch because the bowler is on fire. The best innings are built by sticking it out!” said Edelweiss Mutual Fund in a post on X.

 

Some experts believe that investors should assess their mid and smallcap exposure. If their original sub-allocation of, say, 20 per cent to midcap funds and 10 per cent to smallcap funds has grown significantly above those levels, rebalancing must be done.